£2billion shares windfall from M&S

Marks & Spencer's 350,000 shareholders are in line for hundreds of pounds each from a complicated £2 billion scheme announced today.

The deal means investors with 500 shares will be entitled to £350 in cash. Those with 1,000 shares will receive cheques for £700.

M&S is rejigging its share structure so that every shareholder will be given 17 new shares for every 21 held. Investors will also receive 21 special other shares, which can immediately be sold for 70p a share.

The company has arranged the scheme so that all its investors, large and small, are treated equally. M& S has 165,000 shareholders with 500 shares or fewer, including pensioners, staff and customers. Many have held their investment for years and in the past 12 months have seen the price rise from 220p to more than 370p.

The increase is the result of M& S staging a dramatic recovery. Customers have flooded back as the group has changed its fashion directors, altered the lay-outs of its stores and invited style guru George Davies to design a special range, per una, for the company. Only last week, M& S unveiled a surge in Christmas sales with the takings from clothes alone rising by almost 11 per cent.

Today, the company stressed that it is not giving shareholders any new money, merely giving them the chance to cash in part of their investment. To many shareholders, however, the cheques will come as a welcome post-Christmas present.

M& S is handing back the £2billion to investors, after selling the US business Brooks Brothers and a number of its freehold stores in Britain. The company is also taking on debt.

Today's scheme depends on shareholder approval and a special meeting will be held for investors on 28 February. Shareholders can call a dedicated helpline on 0800-0352780 for information and advice.

M& S chairman Luc Vandevelde said: "Our objective was to treat all shareholders in the same way."

Many companies favour large institutions when they re-arrange their share structures but M& S was conscious of its large band of loyal shareholders and did not want them to be disadvantaged.

The effect of today's scheme is to reduce the number of ordinary shares M& S has in issue. One of the key measures of a company's success is its earnings per share. This is calculated by dividing the profits by the number of shares. The fewer shares a company has, the greater the earnings per share.

Other companies to have done what M& S is doing include BT and Thames Water.